Studying abroad is a great way to broaden your horizons and experience different cultures. It’s also an excellent opportunity for students to improve their language skills, or study subjects that are not offered in their home country. International students overwhelmingly report benefiting greatly from the experience during their time abroad and in the impact on their future careers as well.
One of the most frequently asked questions U.S. students ask themselves when they’re considering a study abroad program is whether they should apply for a foreign enrolled student loan or a study abroad loan?
This blog post will help explain the difference between these two loans so you can make an informed decision about how much money you need to borrow while you’re away from home.
Financial Aid
The first thing we always suggest to US citizen or permanent resident students who want to study abroad is to focus on all types of financial aid that they are eligible for as well as private student loans. In the case of US citizens, permanent residents and eligible non-citizens, this means looking for federal student aid, federal student loans, grants, awards and scholarships. Interest rates on federal student loans are usually more favorable than with a private loan program.
Getting an international student loan from a private lender would be the next course of action if for some reason you didn’t apply for the FAFSA, or you didn’t meet the deadline, don’t qualify for federal aid, or if you still need additional funding to cover the cost of your international education experience.
If you’re already attending college in the US speak to the financial aid office and the study abroad office at your school for their guidance.
International Student Loans
The international student loans we will discuss in this blog post are “Study Abroad Loans” and “Foreign Enrolled Loans“. These 2 loan types are for American students outside the US studying at schools or universities that are approved by the US Department of Education.
The difference is in the type of study abroad program that you are taking.
Study Abroad
These student loans are for those students taking on a short period of international study at an eligible school around the world – often short programs, a semester or a one-year course.
Study abroad students are enrolled at their “home” college, and only travel to international schools for part of their degree. For this reason more private lenders are available for these loan programs because more U.S. schools are approved.
It’s likely that there are study abroad counsellors to advise you on your funding options and help you chose the perfect university to visit.
Foreign Enrolled
These loans, in contrast, are for a US citizen, a permanent resident or an eligible non-citizen, who decides to enrol full-time at an overseas college for the duration of their degree – and these are for undergraduate and graduate students.
Foreign enrolled students have no “home” college in the U.S. because they are a full-time international students at their chosen university. This means that funding, and in particular loans are available at fewer schools, however there are many! You can check if your school is eligible here. For a school to appear on the lenders’ lists where a loan program is an option, they must first be approved for federal loans through the U.S. Department of Education.
Find Foreign Enrolled Loans here.
Eligibility requirements for student loans
Students studying abroad are no different from those studying on home soil in the eyes of the lender. No matter where you are studying, you will need to prove that you are creditworthy (meaning that you have good credit).
Because many students do not have enough credit history in their name to demonstrate creditworthiness, it is highly recommended that they ask a US cosigner to join their student loan application.
A cosigner (co-borrower, sponsor, or guarantor) joins the loan application in order to help the primary borrower to qualify, to improve the chances of securing a favorable interest rate on the student loan, and most importantly to guarantee to the lender that if the primary borrower fails to repay their student loan, the cosigner will do so.
With a cosigner, lenders will be able to use their credit score when making the decision on whether to approve the application.
Loan amount
Getting some or all of your education overseas can be expensive. The maximum loan amount that you can borrow will be set by the lender you choose, but your school must also approve this as you may not borrow more than the total cost of attendance.
Interest Rates
Interest rates on these loans are set by the provider. Applying with a cosigner is recommended to get the best interest rate available. To learn about fixed and variable interest rates see our resource here.
